Is the Prize the Future? (Week 6)

It was recently announced that one of Elon Musk’s social investments, the funding for the XPRIZE in Global Learning, had selected its finalists for its grand prize of $10 million, which is to be awarded to the endeavor that shows the greatest gains in basic academic skills after a field-testing component in Tanzania.[1] Amongst those finalists is a machine learning group from here at Carnegie Mellon who have created a RoboTutor focused on reading and math. While the readings this week focus on creating innovation ecosystems that are amenable to social ventures, the overarching question seems to be whether or not the way forward lies in public-private partnerships, governmental interventions, or perhaps the kind of competitive model represented by the XPRIZE.

The future has deeper roots in the past than what we might realize. An article from The Wall Street Journal in 2010, specifically highlighting the (at the time) fifteen year history of the XPRIZE, noted that the practice of awarding funding as a reward for innovation could be traced back to the Longitude Act, when the British Parliament offered financial rewards to anyone who could figure out how to calculate longitude while at sea.[2] The same sort of incentive was on offer for the first transatlantic flight (thanks to funding from a New York hotelier). What the article seems to conclude is that the prize model spurs innovation, precisely because it takes much of the financial risk of innovation off of society: “With an inducement prize, the sponsor pays only for ideas that actually meet the prize criteria. In other words, technology contests shift the risk of innovation from the patrons to the solver community.”[3] In economic terms, this model increases the total value to society because it anticipates that a producer would never act irresponsibly with respect to its own surplus.

One of the questions that I find myself grappling with, though, is whether the prize model has the potential to exploit participants, or at least to create a scenario ripe for financial ruin on the part of aspiring innovators who are so determined in their pursuit of a prize that they put too much on the line in the process. All of the risks of innovation are borne by the individuals or teams, or their sponsors; not everyone has major institutional affiliation, such as the aforementioned CMU folks, or generous research funding. Even with the potential ethical drawbacks, though, the prize model is one that seems ideal for leveraging the vast wealth of forward-thinking philanthropists with a particular interest in a specific field (such as Musk’s in education). It creates momentum, generates positive publicity for both supporters and beneficiaries, and focuses significant intellectual resources on a single problem until a viable solution is found. With so many complementary ways to support innovation, the prize model may be a truly effective way to continue to diversify the funding portfolio.

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[1] https://www.forbes.com/sites/peterhigh/2017/09/18/possibly-elon-musks-biggest-idea-yet-revolutionizing-education/#4cf9dd184888

[2] https://www.wsj.com/articles/SB10001424052748704505804575483423120157674

[3] Ibid.